A common theme throughout the country in 2016 is states raising their cigrarette
and tobacco taxes to generate revenue. In time when states need revenue,
regressive type taxes like cigarettes and tobacco are easy passes. Politicians
generally spin, adn the public usually accepts the rhetoric that the the
taxes are raised to assist in public health and prevent youths from purchasing
costly tobacco. Other states are also seizing the opportunity to collect
more tax while also serving the public good of reducing the use of cigarettes
In 2016, Oregon will join other states in increasing its ciagrette taxes.
Pursuant to House Bill (HB) 3601, the 1 cent increase will increase the
cigarette tax rate to $1.32 per 20-pack and $1.65 per 25-pack.
While the tax hikes are not as high as sister states like Kansas, Florida,
and California. Those states announced a recent tax hike on cigarettes.
With the hike California will rank in the top 10 by moving the tax from
$0.87 per pack to $2.87. Similarly, Kansas has sin tax increases proposed
for 2016. Nearly identical California, the state would like to get $2.29
per pack, up from $0.79. While they are at it, they are also seeking a
50% increase in alcoholic beverage taxes from 8% to 12%.
Predictably, both proposals have been met with some opposition. When California
came up with a tax bump in 2012, the tobacco community responded with
about $47 million to shut down the legislation. Namely, about $27 million
came from Altria (Phillip Morris) and another $11 million from R.J. Reynolds.
Altria points to the regressive nature of tobacco taxes as it has a more
burdensome effect on lower income smokers than on rich ones. Increasing
tobacco taxes also creates a black market for tobacco, hurts legitimate
businesses, and does not help state budgets.
Tobacco distributors should pay attention to the movement across the country
to increase tobacco and alcohol taxes. An increase in tax can create a
significant shift in your or your client’s business model. More
interesting is the states' shift to broadly classifying new items
into the tobacco or cigarette tax regimes that do not meet the classic
definitions of a tobacco product or a cigarette. Generally, a cigarette
is defined as a role of tobacco wrapped in paper. If the product lacks
tobacco and the definition is left unchanged, there is a good chance that
the product has escaped the tax. If you think you are paying too many
taxes, we would be happy to look into it for you and get your money back.
About the Author
Mr. Donnini is the president and founder of Tobacco Tax Refunds, Inc. He
is also multi-state sales and use tax attorney and a shareholder in the
law firm Moffa, Sutton, & Donnini, PA, based in Fort Lauderdale, Florida.
Mr. Donnini has extensive knowledge handling wholesale tax controversy
In his law practice Mr. Donnini's primary practice is multi-state sales
and use tax as well as state corporate income tax controversy. Mr. Donnini
also practices in the areas of federal tax controversy, federal estate
planning, Florida probate, and all other state taxes including communication
service tax, cigarette & tobacco tax, motor fuel tax, and Native American
taxation. Mr. Donnini obtained his LL.M. in Taxation at NYU. Mr. Donnini
is licensed to practice law in Florida.
Have questions? Please do not hesitate to contact him via email
[email protected] or phone at (954) 639-4496.